Swiss Tax Pact Referendum Increasingly Unlikely

Knud Noelle 6 July 2010

Swiss Tax Pact Referendum Increasingly Unlikely

A referendum on double taxation agreements in Switzerland, which have been greatly criticized for watering down the nation’s banking secrecy, is becoming less likely, after the right-leaning Swiss peoples' party SVP decided not to call for a referendum.

Martin Baltisser, the secretary general of the SVP, which has previously spoken out against the agreements, told Swiss daily Neue Züricher Zeitung that his party will not launch a referendum. WealthBriefing was unable to reach Baltisser yesterday to ask for the reasons behind his party's decision.

However, the conservative peoples' initiative Campaign for an Independent and Neutral Switzerland told this publication that it has not yet finally decided on whether or not to ask for a referendum.

The referendum would concern DTAs with the US, France, the UK, Mexico, Denmark, Austria, Norway, Finland, Luxembourg and Qatar.

These tax pacts, which include an article on information exchange drawn up by the Organisation for Economic Co-operation and Development, are controversial as they state that Switzerland will offer administrative assistance not only in cases of tax fraud, but also in cases of tax evasion, which is not illegal in the Swiss confederation.

The OECD provision states that the contracting jurisdictions must hand over tax information that is “foreseeably relevant for carrying out the provisions of this convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states.”

This has previously been criticized in Switzerland for different reasons including that it substantially erodes Swiss banking secrecy and that it undermines the Swiss legal principle that foreign states can receive administrative assistance only in cases which are illegal in both countries.

The stakes are high: banking in Switzerland, which for decades has benefited from the country's bank secrecy laws, accounts for about 12 per cent of the country's gross domestic product.

Hans Fehr, the managing director of Campaign for an Independent and Neutral Switzerland, told this publication that his organisation has not yet finally decided whether or not it will ask for a referendum. The group is expected to have enough members to quickly reach the numbers of signatures required to ask for a referendum.

Fehr said that a referendum might be more necessary in the case of the DTA with France, as the country has acquired data on clients of a Swiss bank that was stolen by a former employee. Germany has done the same, but the Swiss-German DTA is not yet ready for a referendum.

Fehr said that overall it now looks unlikely that his organisation will ask for a referendum. Instead it will focus on continuing its campaign against Swiss membership of the European Union. 

It has previously been argues that the DTAs are not in the interest of Switzerland and were only adopted by the Swiss Federal Council, the country's government, following much international pressure from the OECD and the member countries of the Group of 20 most influential economies in the world. Others have said that in oder to save the Swiss banking industry these treaties should not be opposed, as they will, for example, restore the Alpine state's reputation.

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